Publication 929 - Tax Rules For Children And Dependents

Form 1099-DIV showing $1,150 ordinary divi-

dividends, to her income increases each of the

Tax for Children Under

dends. All the dividends were qualified divi-

amounts on lines 22, 37, 38, 41, and 43 of her

dends. His parents decide to include that

Form 1040 by $1,100. Linda is not claiming any

Age 18 Who Have

income on one of their returns so they will not

deductions that are affected by the increase to

have to file a return for Philip.

her income. Therefore, her revised taxable in-

Investment Income

come on line 43 is $75,400 ($74,300 + $452 +

First, David and Linda each figure their tax-

$648).

able income (Form 1040, line 43) without regard

of More Than $1,700

On Form 8814, Linda subtracts the $850

to Philip’s income. David’s taxable income is

shown on line 13 from the $2,800 on line 4 and

$56,700 and Linda’s is $74,300. Because her

enters the result, $1,950, on line 14. Because

Part of a child’s 2006 investment income may be

taxable income is greater, Linda can elect to

that amount is not less than $850, she enters

subject to tax at the parent’s tax rate if all of the

include Philip’s income on her return. (See

$85 on line 15. This is the tax on the first $1,700

Which Parent’s Return To Use, earlier.)

following statements are true.

of Philip’s income, which Linda did not have to

•

On Form 8814 (illustrated on the previous

The child was under age 18 at the end of

add to her income. She must add this additional

page), Linda enters her name and social secur-

2006. (A child born on January 1, 1989, is

tax to the tax figured on her revised taxable

ity number, then Philip’s name and social secur-

considered to be age 18 at the end of

income.

ity number. She enters Philip’s taxable interest

2006; this child’s investment income is not

The tax on her $75,400 revised taxable in-

income, $1,650, on line 1a. Philip had no

taxed at the parent’s tax rate.)

come, figured using the Qualified Dividends and

tax-exempt interest income, so she leaves line

•

Capital Gain Tax Worksheet in the Form 1040

The child’s investment income was more

1b blank. Linda enters Philip’s ordinary divi-

instructions, is $15,749. She adds $85, and en-

than $1,700.

dends, $1,150, on line 2a. All of Philip’s ordinary

ters the $15,834 total on Form 1040, line 44, and

dividends were qualified dividends, so Linda

•

The child is required to file a tax return for

checks box a.

also enters $1,150 on line 2b. Philip did not have

2006.

Linda attaches Form 8814 to her Form 1040.

any capital gain distributions, so she leaves line

•

The child does not file a joint return for

3 blank.

2006.

Linda adds lines 1a and 2a and enters the

result, $2,800, on line 4. Because Philip had

These conditions are also shown in Figure 2.

qualified dividends, Linda must complete lines 7

If neither parent was alive on December 31,

through 11 of Form 8814. She includes the

2006, do not use Form 8615. Instead, figure the

amount from line 9 of Form 8814 ($452) on lines

child’s tax in the normal manner.

9a and 9b of her Form 1040. On the dotted lines

If the parent does not or cannot choose to

next to lines 9a and 9b, she enters “Form

include the child’s income on the parent’s return,

8814 – $452.”

use Form 8615 to figure the child’s tax. Attach

Linda includes $648 in the total on line 21 of

the completed form to the child’s Form 1040,

her Form 1040 (not illustrated) and in the space

Form 1040A, or Form 1040NR.

next to that line writes “Form 8814 – $648.” Ad-

The following discussions explain the paren-

ding that amount, plus the $452 of qualified

tal information needed for Form 8615 and the

Figure 2. Do You Have To Use Form 8615 To Figure Your

steps to follow in figuring the child’s tax.

Child’s Tax?

Providing Parental

Start Here

Information (Form 8615,

Was the child under age 18 at the end of 2006?

Lines A–C)

Yes

On Form 8615, lines A and B, enter the parent’s

name and social security number. (If the parents

filed a joint return, enter the name and social

security number listed first on the joint return.)

Is the child required to file a tax return for 2006?

On line C, check the box for the parent’s filing

status.

Yes

See Which Parent’s Return To Use, earlier,

for information on which parent’s return informa-

tion must be used on Form 8615.

Yes

Is your child filing a joint return for 2006?

Parent with different tax year. If the parent

and the child do not have the same tax year,

complete Form 8615 using the information on

the parent’s return for the tax year that ends in

the child’s tax year.

Was the child’s investment income more than $1,700?

Example. Kimberly must use her mother’s

Yes

tax and taxable income to complete her Form

8615 for calendar year 2006 (January 1 – De-

cember 31). Kimberly’s mother files her tax re-

turn on a fiscal year basis (July 1 – June 30).

Use Form 8615 to figure the child’s tax. Attach it to the

Kimberly must use the information on her

child’s return.

mother’s return for the tax year ending June 30,

Note. If the child’s parent* chooses to report the child’s

2006, to complete her 2006 Form 8615.

Do not use

income by filing Form 8814, the child is not required to file a

Form 8615 to

tax return. Do not use Form 8615. (See Parent’s Election To

figure the

Parent’s return information not known

Report Child’s Interest and Dividends.)

child’s tax.

timely. If the information needed from the par-

ent’s return is not known by the time the child’s

return is due (usually April 15), you can file the

*See Which Parent’s Return To Use

return using estimates.

Page 10

Publication 929 (2006)

Publication 929 - Tax Rules For Children And Dependents - 2006 Page 10

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